S&P 500 OUTLOOK:
- The S&P 500 and Nasdaq 100 ended slightly weaker as upward momentum continued to fade.
- In the coming week, the quarterly results of mega-cap tech companies will take the spotlight.
- Traders should focus their attention on the financial results of Microsoft, Alphabet, Meta and Amazon in the coming days.
The performance of the S&P 500 and Nasdaq 100 has been unremarkable in recent days, despite the sharp sell-off in Tesla following its disappointing quarterly results. Both indices have lacked clear directional conviction since at least the beginning of April, although they fell slightly this week, with the S&P 500 down 0.10% at 4,133.5 and the Nasdaq 100 down 0.6% at 13,000.8.
By and large, equities have held up well despite serious headwinds such as high interest rates, high inflation, slower growth and shrinking earnings, but the positive momentum that has led to a solid rally in the major US equity benchmarks since mid-March is clearly fading. It appears that investors are waiting for further corporate earnings before putting additional capital into risk assets.
S&P 500 & NASDAQ 100 CHART
With this in mind, traders will have an opportunity to better gauge the health of Corporate America and the overall outlook in the coming sessions as several major companies release their financial results for the past quarter and provide forward-looking commentary.
While there are many important releases to watch for, the highlights of the week ahead will be earnings reports from Microsoft (MSFT), Amazon (AMZN), Meta Platforms (META) and Alphabet (GOOGL), the parent company of Google. Together, these names account for almost 14% of the S&P 500, so they could certainly determine the short-term market direction and trading bias.
Below is a summary of the key corporate reports worth watching over the next week. For a full list of upcoming events and Wall Street expectations, visit the DailyFX Earnings Calendar.
Source: DailyFX Earnings Calendar
of clients are net long.
of clients are net short.
Megacaps in the technology sector are among the most sought-after stocks in 2023, perhaps on the assumption that the sector will remain resilient even if economic growth slows markedly during the year. This has helped keep Wall Street afloat in recent months despite the banking sector turmoil that erupted in March.
To ensure sentiment remains buoyant, major market players need to deliver strong results and, more importantly, positive forecasts, otherwise the S&P 500 and Nasdaq 100 could be in for a rude awakening.
When analysing upcoming earnings reports from companies such as Microsoft and Alphabet, traders should consider another variable: management’s outlook for artificial intelligence (AI) and related products.
Microsoft’s rapid push into artificial intelligence has been the talk of the town and has set off a race to control what could be the next big revolution in the tech industry. If the key players in this space fail to live up to the hype and high investor expectations, or are unable to develop a clear strategy to monetize the technology, Wall Street’s patience could run out and set the stage for a significant sell-off.